The vast majority of mainstream forecasters don’t see the RBA lifting its cash rate until 2020 at the earliest. Some are now starting to forecast cuts, not hikes.

Financial markets are also pricing in a small possibility that policy rates could be lowered in the middle of next year.

The National Australia Bank (NAB) has become the latest forecaster to abandon its call for RBA rate hikes next year.

“We have delayed our expectation for the first RBA increase in the cash rate to the second half of 2020,” said Alan Oster, Chief Economist at the NAB.

The NAB previously forecast the RBA would deliver two 25 basis point rate increases in the second half of next year, one in August and again in November.

The RBA hasn’t hiked its cash rate since late 2010.

Should the NAB be correct, it will be a full decade since policy rates have been increased.

Though the Australian economy has performed much like the NAB expected this year, persistent weakness in wage and inflationary pressures and, more recently, steeper declines in Sydney and Melbourne home prices, were the main factors behind the decision to push back the time frame for expected tightening for another year.

“While output growth has been largely as expected over the 2018, wages pressure remains weak and hence inflationary pressure has remained low, with the core measures continuing to track below the RBA’s target band. We expect that will continue through all of 2019,” Oster said.

“Our forecasts see a moderation in growth back to potential of around 2.3 to 2.5% and unemployment falling a little further to 4.75% and then remaining at that level.

“Falling house prices suggest a bigger impact on housing construction than previously incorporated and additional concerns about the consumer, though low rates and unemployment are important offsets.”

The vast majority of forecasters polled by Bloomberg now see the RBA beginning to normalise policy in 2020 at the earliest.

Of Australia’s big four banks, only the Commonwealth Bank still sees the cash rate increasing next year — an increase of 25 basis points in the December quarter.